by Ted Toal on June 9, 2009
According to a recent article in CNN Money, only if you attempt to sort out the handful of winners from the rest of the market.
As the article points out, the majority of individual securities tend to post negative returns over the long run.
In fact, research by Dimensional Fund Advisors found that from 1980 to 2008, the top-performing 25% of stocks were responsible for all the gains in the broad market, as represented by the University of Chicago’s CRSP total equity market database. [click to continue…]
by Ted Toal on June 9, 2009
This week marks the two-year anniversary of the financial meltdown. What lessons have we learned?
On June 12, 2007, news broke that a 10-month old Bear Stearns hedge fund that speculated in mortgage-backed securities was melting down. The fund used leverage and bet heavily on bonds tied to subprime mortgages.
As the market for subprime mortgages began to implode in early 2007, so did the Bear Stearns fund.
This was the first major piece of information that all was not well in the land of finance, and, of course, you know what happened over the next two years. [click to continue…]
by Ted Toal on June 2, 2009
Sunk costs and mental accounting can be hazardous to your wealth.
Imagine you just arrived at a theater and as you reach into your pocket to pull out the $10 ticket you purchased in advance, you discover that it’s missing. Would you fork over another $10 to see the movie?
Compare that to a second scenario in which you did not buy the ticket in advance, but when you arrive at the theater, you discover you lost a $10 bill. Would you still buy a movie ticket? [click to continue…]
by Ted Toal on May 26, 2009
“Wall Street never changes, the pockets change, the suckers change, the stocks change, but Wall Street never changes, because human nature never changes.” –Jesse Livermore
Jesse Livermore is a famous early 20th century trader and speculator who was immortalized in the 1923 book, Reminiscences of a Stock Operator by Edwin Lefevre.
Many consider Livermore one of the greatest traders and speculators who ever lived.
Now, we’re not mentioning Livermore because we think aggressively trading and speculating in your account is the way to go. Instead, we want to highlight the above quote from Livermore and discuss its relevance to today. [click to continue…]
by Ted Toal on May 18, 2009
In a battle of the sexes, finance professors Brad Barber and Terrance Odean crunched the trading data on over 35,000 households from a large discount brokerage firm.
They built upon psychological research, which indicates that in the area of finance, men tend to be more overconfident than women. Additional research shows that overconfident investors tend to trade more often than less confident investors.
Armed with this data, Barber and Odean went to work. [click to continue…]
by Ted Toal on May 11, 2009
Would you agree that the stock market has been volatile in the last six months?
As you may have guessed, that’s a bit of a trick question. Most people would say that, yes, the stock market has been very volatile since early November 2008. [click to continue…]
by Ted Toal on April 24, 2009
From the January, 2000 Smart Money Magazine:
“The Underachiever’s Club – Thanks for Nothing: Sixteen mutual funds reopened to new investors in 1999. But returns for these three make you wonder why they bothered.” [click to continue…]
by Ted Toal on April 22, 2009
“Whoever manages my money better beat the S&P 500! What’s your strategy? What’s your performance? Jim Cramer says buy Lehman Brothers. What do you think of Lehman Brothers? Should I buy gold? ”
A prospective client asked these questions during a meeting last year. When I attempted to discuss goals, he directly focused on investments and described the classic investors mistakes he made over the last decade including: [click to continue…]
by Ted Toal on April 9, 2009
The financial media is back at it.
A recent article in the Financial Times announced that “Anyone who started saving 40 years ago…has found that stocks have performed no better than bonds.”
The article also contains a graph that proudly displays over a 20-year span, from 1929-1949, bonds beat stocks.
Further, the article continues with opinions that stock investing is dead and gives examples of real investors damaged by this market. (We can’t dispute this last part, as many have been damaged by this down market. However, the article tells us nothing about the planning or investment strategy these people followed.) [click to continue…]
by John Augenblick on April 9, 2009
The occurrence of “market watching” unleashes during a robust bear or bull market. The practice of investors checking the stock market’s daily swings has spread faster than the Pinot Noir fad.
Frequent overused phrases in the media include, “The Market is up big!” or “The Market plunged.”
These market commentary one-liners pop up with increasing frequency at gas stations, soccer fields, grocery stores and permeate everyday life. [click to continue…]
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